2012 Hot Topics in Retirement - Aon

Roth
Most financial experts agree that a Roth savings feature can provide a
significant benefit to a variety of savers—from highly paid employees to
lower-income workers. Roth contributions were introduced beginning
January 1, 2006. At that time, plan sponsors were reluctant to implement
the feature given the infancy of the option as well as its possible expiration
in 2011. However, the Pension Protection Act of 2006 (PPA) established
the Roth feature as a viable long-term savings option in qualified plans
(including 401(k) and 403(b) plans) by removing the sunset provision.
Further, 457(b) plans were added to the list of plan types eligible to implement
Roth as part of the Small Business Jobs Act, e�ective January 1, 2011. While
Roth is a relatively new feature for most plans, to date, participant usage
has been significant, especially among newly enrolled employees.
Roth adoption has grown significantly in recent years, with today nearly
40% of plans o�ering Roth, up five percentage points from 2011. Additionally,
of those employers that do not yet o�er Roth, interest is also up, with 29%
stating that they are somewhat or very likely to add the feature during 2012.
Roth Usage and Plans for 2012
Current State
Already have
39%
Don’t have
61%
(n=429)
Future Direction
Very likely 8%
Somewhat likely 21%
Somewhat unlikely 27%
Very unlikely 45%
While the barriers to adding a Roth have decreased, among employers that
have not yet adopted, 40% of sponsors said that it must be clear that general
Roth participant usage will be significant enough to justify adding it to the
plan, and 30% of employers cited administrative complexity and/or the cost
of o�ering a Roth as barriers.
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